In what could come as a relief for Non-Resident Indians in the US, Senate Republicans have proposed an amendment in the conditions for tax on remittances under the One Big Beautiful Bill. At the same time, the critical Section 899 has been dropped, which, in turn, could benefit India.

“The tax imposed shall apply only to any remittance transfer for which the sender provides cash, a money order, a cashier’s cheque, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider,” the updated draft of the proposed One Big Beautiful Bill Act, as submitted by the Senate Republications, said. The tax rate would be 1 per cent of the remittance transfer, as against 3.5 per cent. This tax will apply to transfers made after December 31, 2025.

The bill has been passed by the US House of Representatives, and has now moved to the Senate. Once the Senate passes the bill after debate, it will go to the President for his signature and enactment. All these are expected to be over by July 4, the US Independence Day.

The draft also said that the proposed tax will not be applicable to “any remittance transfer for which the funds being transferred are withdrawn from an account held in or by a financial institution or funded with a debit card or a credit card which is issued in the US.”

Explaining this, Lloyd Pinto, Partner - US Tax at Grant Thornton Bharat, said: “These changes should come as a huge relief to the NRI community in the US as they will not be subject to this remittance tax if the remittances are made through accounts held with designated US banks and financial institutions or funded via debit or credit cards issued in the US.”

The sixth round of RBI’s India remittances survey covering 2023-24 released on Wednesday shows that the share of advanced economies in India’s inward remittances has risen to surpass the share of Gulf nations. The largest share of remittances into India in 2023-24 came from the US (27.7 per cent), while the United Arab Emirates (UAE) came second at 19.2 per cent. In contrast, the UAE took the top spot with a 26.9 per cent share and the US was in the second spot with 22.9 per cent share in the 2016-17 survey.

Section 899

In another move, which could have an impact on India is the dropping of Section 899 from the original bill. The Section targets unfair foreign taxes — defined as discriminatory or extraterritorial levies imposed by foreign governments on US persons or foreign entities owned by them. An unfair foreign tax generally includes an undertaxed profits rule (UTPR), a digital services tax (DST), and certain other foreign taxes.

Explaining the removal of this bill, Amit Maheshwari, Tax Partner at AKM Global, said if it had been enacted, Section 899 could have significantly raised withholding taxes on Indian companies and Indian investors with US sourced income. Many Indian businesses, family offices, and funds invest in US equities, debt instruments, and real estate, and this provision would have affected them by increasing costs. “Its withdrawal ensures that the India-US treaty benefits are still continued and investor confidence is maintained,” he said.

Published on June 28, 2025